Is it still a 100% premium after a plunge of 70%? SharpLink's ETH gamble is unresolved

Author: Fairy, ChainCatcher

Edited by: TB, ChainCatcher

SharpLink Gaming, a star small-cap stock that is hailed as the "Ethereum version of micro strategy" by the market, was originally stepping on the treasury narrative of ETH. A SEC document made its stock price plummet by nearly 70% after the market.

Hot praise becomes doubt, faith dives into panic. This article will disassemble this sudden "trust crisis" and discuss the hidden picture behind it.

The market misreading behind the plunge

At the end of May, SharpLink Gaming completed a $425 million private equity financing (PIPE). Investors include ConsenSys, Galaxy and Pantera Capital, which have a large holding of Ethereum, and funds are used to acquire ETH as reserve assets. This operation caused SharpLink's stock price to soar to $124, up more than 40 times from the time of financing news before the announcement.

Yesterday, SharpLink Gaming submitted a S-3ASR registration statement to the US SEC, authorizing the resale of up to 58,699,760 shares of PIPE financing related shares. This means that more than 100 PIPE investors can sell their shares at the right time.

For a time, the market misread it as "PIPE investors have begun to apply for shipments", and panic spread rapidly.

Market misread

SharpLink's stock price fell to $8.75 after the market, a drop of 73%, and then rebounded slightly to the $10 range.

Source: yahoo!finance

Subsequently, Joseph Lubin, Chairman of the Board of Directors of SharpLink and CEO of Consensys, clarified that this document is only a regular registration process after PIPE, and its function is to "pre-register shares for potential resales" and does not mean any actual sale. He stressed: "The number of shares held in the document after issuance is hypothetical data, and Consensys and myself have not sold any shares."

Although the storm has temporarily subsided, the market is still full of speculation about SharpLink's trends. "In my experience, given the background of some of the investors involved in the trading, they may indeed be quietly selling. In addition, 'prefunded warrants' are actually an arrangement to circumvent position disclosure and avoid becoming an affiliate."

He further pointed out that SharpLink has immediately submitted a $1 billion ATM plan (issuing shares at market price) since obtaining WKSI qualification on May 30, and they may have quietly completed financing through ongoing transactions without immediate disclosure. If the operation goes smoothly, it is possible to issue an announcement tomorrow to spend $1 billion to purchase ETH, and then ignite market enthusiasm again.

SBET is currently 100% premium?

SharpLink (SBET)'s current stock price performance and premium situation also reveals investors' complex expectations for its future trend. According to Zheng Di, a pioneering technology investor, SBET's current premium is about 100%.

According to the documents submitted to the SEC, the company's total share capital after being fully diluted is 77,526,682 shares. Based on the after-hours stock price of about $10, the company's total market value is about $800 million. The number of shares registered this time is 75,319,345 (assuming that the warrants of the consultants and investment banks have been converted into shares and subscribed), plus the original share capital of 690,000 shares, Zheng Di inferred that the previous ATM worth $1 billion (stocks issued at market price) actually only executed about 1,517,337 shares, indicating that most of the ATM quota may not have been used yet, and there will still be dilution risks in the future.

It said that the total amount of PIPE financing this time is US$425 million. Considering that Consensys is the company's Ethereum strategic consultant and there are reports that Consensys' related address has purchased about US$300 million ETH, it is reasonable to believe that most or even all the financing funds have been used to purchase ETH. Given the limited recent price fluctuations of ETH, the company's existing ETH holdings should remain at the level of approximately US$400 million.

Therefore, based on the above factors, Zheng Di speculates that the current market premium of SBET is about 100%.

The premium of SBET reflects to a certain extent the market's recognition of the value of its assets, especially the potential value of its Ethereum reserves. However, excessive premiums also bring market risks. In the future, with the release of more ATMs (issuing stocks at market prices) quotas and the dilution of potential equity, stock price fluctuations may intensify.

This drama from SharpLink is still ongoing. If, as Zheng Di analyzed, there is still room for dilution of equity in the future, it may bring volatility pressure in the short term; and, as Charles Allen said, the news of purchasing US$1 billion ETH may be disclosed in the near future, it may ignite market sentiment and push up the stock price.

This superposition of "opacity" and "possibility" makes SharpLink full of both controversy and imagination space. The real climax may still be ahead.